Is Your Mortgage Holding Back Your Investment Dreams?

Homeownership has long been a pillar of the Great Australian Dream, a symbol of security, and an investment in one's future. Yet, in the grand narrative of personal finance and real estate, we often overlook a crucial question: Is your mortgage holding back your investment aspirations?

  • February 19th, 2024
The Unseen Cost of Calling a House a Home As we come of age and establish our lives, the call of homeownership can be deafening. The marketing around 'owning your slice of the world' and the romanticisation of a place to call your own are persuasive. However, the hard truth is that for most, the house they live in (referred to as the principal place of residence, or PPR) is not an asset in the truest sense. It doesn't generate income, and it doesn't offer the tax benefits that investment properties do. Moreover, a mortgage often shackles inhabitants to a substantial and long-term financial burden. A closer look at the numbers reveals a stark contrast: Renting a house is often significantly cheaper than owning it. Renters are not burdened with the expenses of rates, building insurance, and the often-higher monthly costs that can accompany a mortgage. Real estate experts have increasingly found that investing in property can be more cost-effective than living in a house you own. The tax deductions provided by an income-generating rental property are a stark contrast to the inert returns of a PPR.Rent-Vesting: A New Paradigm The rising popularity of rent-vesting, a strategy where individuals choose to invest in property while renting a home themselves, underpins a growing realization among homeowners. One doesn't necessarily need to 'own' where they live. Instead, they can own where they make returns, potentially at a far higher rate and with greater flexibility. Consider the example of two identical houses side by side. One is for sale at a hefty $900,000, while the other is available for rent at $600 per week. If you choose the path of homeownership, you could be spending upwards of $4,400 per month to live in the house. Contrast this with the investment route: Buying the home to rent out and living in the next-door property significantly reduces your monthly outgoings to around $3,400. Selling the Dream: A Case for Monetizing Your Home For those caught in the bind of a burdensome mortgage, the solution might be counterintuitive: sell the property. In the context of a PPR, selling your home has distinct financial advantages. Unlike investment properties, your PPR is exempt from capital gains tax. By selling your home and moving into a rental property, you could significantly lower your monthly living expenses, thereby freeing up capital to invest in income-generating assets. This strategy not only offers immediate financial relief but also catapults your investment journey, unhindered by the weight of a mortgage. It's a compelling case for recalibrating one's approach to homeownership and investment, one that prioritises financial freedom over a cultural construct. The Path Forward Navigating the complex interplay of real estate, individual finance, and investment requires a nuanced approach. Here are some considerations for those contemplating a shift from homeownership to investment: Do the Math Calculate the monthly costs of living in your home versus the potential costs of renting out your property and living elsewhere. Take into account the various expenses tied to homeownership and the potential returns or tax benefits of an investment property. Consult Experts Seek advice from real estate professionals, accountants, and financial advisors. They can provide valuable insights and clarity on the financial implications of selling your home. Consider Your Lifestyle Reflect on the non-monetary benefits that homeownership offers, and weigh them against the potential returns from an investment property. Personal comfort, financial security, and future plans should all factor into your decision-making process. Plan Your Exit Strategically If you choose to sell your home, strategise the sale to maximise returns and minimise disruption. This may involve taking a closer look at the current local property market, staging your property, and engaging with a real estate agent who specialises in your area and property type. Review and Adjust Your Portfolio Once you've freed up capital by selling your home, carefully consider how to allocate those funds. Focus on assets that align with your financial goals and risk tolerance.A Final Word When it comes to making the bold move of transitioning from the role of a homeowner to that of a savvy investor, you need a trusted guide who can navigate you through the financial, educational, and emotional decision-making journey. Here is where The Property Mentors stand out as your ally. As property investment specialists, we not only understand the nuances of the market but also empathise with the personal touch each decision requires. Our dedicated team is equipped to demystify the complexities of property investment and personalise a strategy that aligns with your unique goals. Taking that first step towards financial liberation is undeniably daunting, but with The Property Mentors as your co-pilot, you're set to soar. Reach out to us and begin crafting the future that your vision deserves – one smart investment at a time.


  • September 5th, 2023

Rate Steady at 4.1%: Benefits for Property Market Investors

The Reserve Bank of Australia's decision to leave the cash rate at 4.1% is a welcome relief for buyers and investors in the property market, and The Property Mentors can provide guidance and support needed to take advantage of this opportunity and make wise financial decisions about your investments.

read more